Cryptocurrency scams keep reinventing, deceiving millions of investors. The fraudsters convince investors by their witty words and persuasive tone. It often works effectively. Once, they scam a few investors, they repeat the same process but under a different name. 

Crypto scams are generally like any other scam, except the fraudsters are after your crypto assets rather than your cash. Their goal is to manipulate investors into divulging personal information or transferring digital assets to the scamster’s account.

During a panel discussion organized by IIM-Kozhikode, P Vasudevan, an executive director at the Reserve Bank of India said that cryptocurrencies cannot be referred to as “currencies” as they have no underlying value. The RBI has been critical of new-age currencies like bitcoins, stating they pose a systemic risk to the financial systems.

Biggest Crypto Scams in India

The GainBitcoin Ponzi Scheme Scam

The GainBitcoin Ponzi scheme scam happened in the year 2018. The businessman Amit Bhardwaj defrauded 8,000 plus individuals amounting to INR 2,000 crore in total. He engineered a multi-level marketing scam, manipulating and enticing investors to exchange Bitcoins at promised high returns. He introduced an 18-month contract guaranteeing them a 10 percent yield.[4]

The Morris Coin Scam

The Morris Coin Scam surfaced in the year 2022. It was also the newest fraud in the crypto scams in India. Allegedly, 900-plus investors fell victim to a website promoting a counterfeit crypto named Morris coin. The victims participated in the initial offering of the fraudulent cryptocurrency. The scam amounted to INR 1,200 cr. [4]

The Karnataka Bitcoin Scandal 

The Karnataka Bitcoin scandal took place in the year 2021. The scandal saw the Central Crime Branch, the specialized investigative unit of the Karnataka Police confiscate 31 Bitcoins valued at INR 9 cr from a Bengaluru-based hacker in November 2021. [4]

STA Token

STA Token, a company that deceived 20,000 plus individuals and amassed INR 1,000 cr through purported crypto investments. This was revealed as a countrywide cryptocurrency scam by the State Crime Branch. STA token company was accused of engaging in unauthorized money circulation and illegal multi-level marketing without the Reserve Bank of India’s approval. Gurtej Singh Sidhu and Nirod Das, the two executives of the company, were apprehended for planning the Ponzi scheme and the Economic Offences Wing (EOW) confiscated their accounts, which contained shady cash deposits surpassing INR 15 cr. [5]

Common Cryptocurrency Scams To Watch Out For In 2024

Bitcoin Investment Schemes

In this scheme, the fraudsters reach out to investors under the guise of experienced investment managers. These individuals assert to have amassed millions of people through crypto investments assuring them profitable returns. [3]

Phishing Scams

Phishing scams are not new but still remain prevalent. Scammers distribute emails that contain malicious links to counterfeit websites and collect personal information, including crypto wallet key data. Unlike passwords, users are issued with only one unique private key for their digital wallets. However, if this key is stolen, rectifying the situation poses challenges. Each key is exclusive; hence, replacing it necessitates creating a new wallet. [3]

Pump-and-dump Schemes

Pump-and-dump scheme involves scammers artificially inflating the cryptocurrency price by coordinating purchases and positively promoting it. Subsequently, they quickly sell off their holdings, causing the price to drop and leaving unsuspecting investors with worthless tokens. [2]

Rug Pull Scams 

Rug pull scams entail investment fraudsters artificially inflating the coin to attract funding, value of a new project or non-fungible token (NFT). Once they secure the funds, they disappear with the capital. The coding embedded in these investments forbids investors from selling the bitcoin post-purchase, thereby rendering their investment useless. [3]

Fake Initial Coin Offerings

Fake ICOs entice investors with the prospect of profitable returns on a purportedly groundbreaking new cryptocurrency venture. Even so, the project frequently proves to be non-existent, leading to the vanishing of the funds raised. [2]

AI Scams

As artificial intelligence (AI) becomes progressively prevalent, perpetrators are discovering novel methods to exploit the cryptocurrency market. Utilizing AI chatbots, attackers can interact with users, endorsing fraudulent tokens and offering guidance. These chatbots are programmed to inform investors about smooth lucrative investment prospects, which frequently evolve into pump-and-dump schemes aimed at artificially inflating token values before implementing a sell-off. [3]

How To Identify Cryptocurrency Scams?

• Manage your crypto wallet keys diligently: Each cryptocurrency wallet is equipped with a distinct key for entry. It’s crucial to safeguard the wallet key information, ensuring to retain full control over accessing it. [6]
• Use your wallet judiciously: When you’re dealing with significant sums in cryptocurrency, take extra precautions to safeguard your assets. Implement robust security protocols like two-factor authentication, consider acquiring insurance coverage against potential scams and store a substantial portion of your holdings in cold wallets. [6]
• Secure your wallet: When engaging in crypto investment, ensure you own a wallet with private keys. If a company requests you for your keys for investment participation, it’s likely a scam. Keep your wallet keys confidential. [7]
• Monitor your wallet application closely: When initiating money transfers, start with a very small amount to verify the authenticity of a cryptocurrency wallet app. If you encounter any suspicious activity while updating your wallet app, pause the update and uninstall the application. [7]
• Invest only in comprehensible ventures: If you lack enough clarity on how a specific cryptocurrency functions, take a halt and conduct thorough research before deciding on cryptocurrency investment. [7]
• Exercise caution with social media advertisements: Crypto fraudsters frequently leverage social media to promote deceitful schemes. Exercise skepticism when encountering cryptocurrency opportunities on social media platforms and conduct due diligence. [7]
• Conduct thorough research: Established cryptos are generally legitimate, but for lesser-known ones, delve into research. Seek whitepapers, authentic reviews and testimonials and scrutinize the team behind the cryptocurrency. Consult a reputable fake list of cryptos for scam verification. [7]
• Evaluate feasibility: Companies assuring investors guaranteed returns or instant wealth are probable scams. Approach opportunities cautiously if they appear too good to be true. [7]

How To Report Crypto Scams in India?

Let us see some general steps to report crypto scams in India:

Step 1: Lodge a complaint with your local police (provide complete comprehensive details and evidence).

Step 2: Reach out to the nearest cybercrime cell (as they handle online frauds including cryptocurrency fraud).

Step 3: Report the cryptocurrency fraud to regulatory bodies like the Reserve Bank of India or the Securities and Exchange Board of India.

Step 4: Make use of the National Cyber Crime Reporting Portal (NCRP). You can register your complaint concerning cyber crimes on their portal. 

Step 5: Inform Consumer Protection Agencies about the scam as they might offer you guidance on steps or investigations. 

Remember to provide as much information as possible, including communication records, transaction particulars and any other supporting evidence. Exercise caution concerning potential scams and verify the authenticity of crypto investments before engaging in them.

How To Avoid Crypto Scams

Given the increased risks with digital assets, being cautious is essential to avoid being crypto-scammed. You need to follow these tips to avoid crypto scams:

• Don’t respond to unsolicited contact. Be aware, that no matter who contacts you from any financial institution or even your crypto brokerage, the best practice is not to respond to any of the calls or messages. You can personally check the institute’s official website and contact them independently via the official number.
• Check before you click. You mustn’t click on any attachments or hyperlinks sent from unfamiliar contacts.
• Keep accounts separate. Do not permanently link your cryptocurrency brokerage accounts to your traditional bank accounts. 
• Place a hold immediately. If any unusual activity occurs on your account, do not wait, just place a hold on your future transactions because prevention is better than cure.
• Use reputable companies. To ensure your crypto security and personal safety utilize a wallet from a reputable company, Exodus and MetaMask are reputable hot wallets or Ledger, Trezor or Bitbox are reputable cold wallets, you can consider.
• Look for HTTPS. A URL should have HTTPS as opposed to just HTTP, for cryptocurrency exchange or wallet that indicates the site has secured and encrypted traffic. 

By carefully evaluating the type and severity of the scam, victims can develop a comprehensible understanding of initiating requisite actions and potential recovery prospects.

Source:

1. Statista
2. Times of India
3. TechTarget
4. CNBC TV 18
5. The Economic Times
6. ZebPay
7. Kaspersky